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Written by Maha Ibrahim

Maha Ibrahim: Bring on the bubble.

With the LinkedIn, Pandora and Bankrate IPOs behind us, and Groupon, Zillow, CafePress and others waiting in the wings, there’s a palpable sense of optimism in Silicon Valley. Over 80 companies have filed to go public in the first six months of the year, and dozens more will certainly file in the months to come.

Are we entering another tech bubble? Yes. But I would argue that bubbles can be very positive, and this one is needed to kick start a long-sputtering economy.

While many of my venture capital colleagues argue that “it’s different this time” and “these companies really are worth billions”, I’m the first to admit we’re entering another tech IPO bubble. With all bubbles come the inflation, the euphoria, and finally the pop, so there is bound to be some pain around the corner. But right now we’re in the run-up phase of the bubble, and that’s great news for not only the venture capitalists, investment bankers, and entrepreneurs who will directly profit from IPOs, but also for the wider economy as a whole. Why? Because the early days of a bubble create optimism, and optimism fuels hiring, spending and growth.

Two-thirds of Bay Area executives currently think the economy is getting better, and 60% believe it will improve even more in the next year. Confident bosses hire people – creating more jobs and improving the local economy. In April, when the IPO frenzy began in earnest, job openings at Bay Area start-ups had more than doubled to 3,609, compared with 1,739 in April 2008, before the downturn.

The Silicon Valley economy has already seen this confidence translate into jobs in the Bay Area, where unemployment is now about 9%, compared to 11.7% in California overall. And as venture capitalists, we’ve seen the impact of optimism firsthand: several of our portfolio companies, including Kabam, Zoosk, and Tremor Video, are racing to hire enough people to keep pace with growth. This hiring may be centered in Silicon Valley, doing little to bring up employment rates in other regions right now, but once companies start hiring here, competitors across the globe will have to do the same – causing a ripple effect in hiring. Plus, Silicon Valley is not alone in its growing IPO euphoria. Companies in Russia, China, India, Brazil and across Europe are also feeling positive for the first time in years, and readying IPOs of their own.

To be fair, the current bubble doesn’t have many parallels to the dot-come bubble. Bubble 2.0 is nowhere near as inflated as the dot-com bubble at its height – when the NASDAQ reached 5100 – and the fall will be nowhere near as brutal. Many of the companies that will go public in the year to come are far more substantial than the dot-coms that rose to fame in a flash and disappeared in a poof. Even Groupon, which has been maligned for its outsize losses, does have substantial revenue – $650 million in the last quarter. Many of the dot-coms that went public had yearly revenues 100 times less than that. Do Groupon, LinkedIn and others in line to become public companies deserve the multiples they’re getting on the market? That much is open for debate – but I think everyone would agree they deserve to be public companies.

Another big difference between this bubble and the dot-com bubble is supply and demand. There is currently huge pent-up demand for high-growth Internet companies, simply because there have been a dearth of IPOs in this sector for the last three years. In the dot-com heyday, there was huge supply of hundreds of Internet company IPOs. Today, there are only a handful of IPOs on the horizon, so it goes without saying demand will be greater for their shares, and they will attract higher valuations on the open market.

No one is sure how long this bubble will last – observers can’t even agree whether this is a bubble or not. But I personally think this bubble will be shorter than its dot-com predecessor. In general, economic boom-and-bust cycles have become increasingly shorter over the last 30 years, and with the prevalence today of real-time information, instant trades, and inextricably-linked international markets, this bubble will rise and fall more quickly and under greater scrutiny from investors, regulators and consumers.

But what about the companies that go public in Bubble 2.0? Will they disappear in a blaze of smoke like Webvan, Pets.com, and Boo.com? That is another difference between the dot-com and today’s bubble. Groupon may not retain its lofty valuation, but it won’t go out of business. It has a solid revenue model and a growing customer base. Both were rarities in the dot-com days.

Sure, we’re in a bubble, and I say bring it on. Bubbles reward entrepreneurs for their vision – returning capital to them so they can start even more companies – and reward investors for taking risks on early-stage unproven companies. They also reward the economy as a whole. And if we can learn from our mistakes, we should be able to contain the downside damage of Bubble 2.0 when it inevitably pops.